Supply chains are complex, and we’ve witnessed in recent years how easily disruptions efficiently affect goods from point A to point B. It might seem like the process is uncontrollable; fortunately, that’s not the case. On the transportation end of supply chains, shippers adapt to the transportation needs at any given time to ensure this part of the supply chain continues as well as possible. They also do what’s necessary to continue to meet high consumer demands, which means quick, on-time deliveries at the lowest costs. While disruptions and consumer demands are significant challenges, shippers with the right strategies and technologies can navigate them successfully. This is why transportation network optimization is important.
What Is Transportation Network Optimization?
Transportation network optimization is simply streamlining your network of logistics carriers, the methods for shipping, and the processes for managing the network. The concept is about maximizing available capacity options while finding the best ways to exceed goals and key performance indicators — which, in turn, leads to more satisfied customers.
The top three goals shippers should consider in optimizing the transportation network are price, capacity, and service. Each shipper needs to find the best balance of price with capacity and service. Nonetheless, in modern times, this balance often doesn’t come down to one carrier that offers the best in all three areas. For optimal logistics, shippers need a diverse carrier portfolio that can adapt to the best fit for each shipment.
Transportation optimization is about responsiveness and shifting to meet the needs and demands. However, optimization cannot occur without first digitizing data, gathering disparate shipping data, cleansing the data normalizing it, and then analyzing the data to make smarter decisions, yielding stronger transportation network optimization. This evolution of how shippers go to market is an adaptation towards proactive, forward-looking decision-making. This adaptation allows shippers to find the best choice for each situation and manage the disruptions in the shipping industry. In today’s world, shippers often use a combination of carriers, last-mile deliverers, freight brokers, and third-party or private fleets. You can gain some control over problems like truck driver shortages and high fuel prices, as well as meet higher customer expectations and demands. An optimized system adapts to the market and world and shifts to provide the right solutions as your company evolves and grows over time.
To achieve freight optimization, shippers need a better understanding of the best carriers for each shipment, the optimal modes, services, and ship-from locations. For instance, it may be better to ship straight from a warehouse or manufacturer, while in other cases, it’s best to ship from a store.
Using the best options ensures the shipper will get lower prices, improved visibility, and better customer delivery results. While it may seem highly complex to manage these aspects,. technology provides an efficient and strategic way to find and manage carriers within a network. The right technology makes it easier to compare carriers, optimize routes, find backhaul opportunities, match available capacity with shipment needs, and more. As a result, overall transportation optimization continues to help you adapt and improve your methods.
Steps to Optimize the Transportation Network for Shippers
It’s one thing to know there’s a need to optimize a transportation network and another better to do it through strategic transportation spend management. Freight optimization may seem too big and complicated to handle, especially for a company with limited resources, but knowing the right strategies can guide shippers forward.
Here are five steps to get you started toward transportation network optimization:
1. Ready Your Data
Collecting data allows you to create a baseline of current shipping activity and a method for measuring carrier performance.
You gain increased interoperability and visibility into data by integrating your transportation management system (TMS) with other logistics and shipping systems like the warehouse and order management system. With access to more data, you can filter down to quality, relevant, and comparable information that provides actionable insights.
By freeing data from disparate silos, you can combine all relevant information to gain the best insights that guide optimization. In addition, the more access you have to relevant data, the more you can see problems and areas for improvement related to the transportation network.
2. Gain Insights from Data
Data helps to inform strategies that optimize connections and build a stronger future for your network and company. Gaining a comprehensive view of your global transportation spend shows where new connections could improve the current transportation and logistics networks.
Cleansed and normalized data also helps you examine your current relationships to improve your competitive edge through steps like mode or service shift. Also, consider hub injection and ship-from-store options as potential revenue boosters. Automated machine learning technology can check for problems better than team members, finding issues within the transportation network in real-time and offering insights for solutions. For example, once you clearly understand that something has changed, you can assess whether it truly is a problem and determine its impact on your business. Machine learning brings actionable intelligence into the loop, so the recipient understands what the data is saying and what actions to consider next. In other words, anomalous events are presented with contextualized information to our customers to explain why something anomalous happened and what they can do to mitigate further exposure.
3. Get Deeper Insights via Data Analysis Modeling
Analysis of historical data can create dynamic, complex modeling scenarios to gain a view into the future and how to strengthen and expand your network. It’s possible to include store capacity and inventory restrictions to best leverage stores as ship-from points. Data-backed insights allow you to make the most informed decisions on network growth optimization and conduct data-based business reviews with carriers.
Nonetheless, an optimized network uses a balance of looking at historical data and real-time data. Cutting-edge technology allows you to gain real-time information on shipment status, capacity, and other markers. That data can be integrated with additional pertinent information to optimize the transportation network. You can also use real-time information and historical data for forecasting.
4. Develop KPIs to Score Carrier Performance & Set New Expectations for Carriers
Key performance indicators (KPIs) are an effective method for carriers to improve continuously and keep them in line with their agreements. In addition, you can use KPIs to negotiate contract rates based on data rather than anecdotes or personal feelings.
KPIs act as guideposts that show whether current transportation methods and new strategies are working. They offer insights into problems and areas for improvement. Technology can automatically track many KPIs for you or bring together data that allows you to run thorough reports. Not only can you use KPI data and insights to follow carrier agreements, but you can also use the data to strategize more effective methods for a better-optimized network overall. With the support of technology, you’ll continually find ways to improve according to these metrics.
Some good data-backed KPIs to track include:
- On-time pickup
- On-time delivery
- Average and running monthly spend
- Average cost per shipment and per pound
- Approved carrier and service routing
- Zone distribution
- Weight distribution
- Packaging and dimensional weight
- Freight invoice accuracy
Intelligent Audit’s data analysis capability can provide data on these KPIs, allowing for more visibility into the transportation system and the ability to improve it as needed. You can use this data and related insights to optimize each KPI and the combination of KPIs for improved freight optimization.
5. Using Beneficial Technology Tools to Get the Data and Optimize the Transportation Network
Technology enables you to collect relevant and quality data and turn that into valuable insights. It can also do a lot to compare and track carriers. The technology tools that digest the data, track analytics, and share intelligence for shipping smarter and optimizing the transportation network are:
- Noticing trends and pricing forecasts to facilitate growth
- Using data to recommend strategies or carrier business reviews
- Sharing helpful business intelligence and analytics specifically related to logistics
- Providing insights on how to better partner with carriers to gain the competitive edge
- Facilitating more efficient carrier payments
- Automating the auditing of carrier invoices and addressing related issues
Save Big by Optimizing Your Transportation Network with Intelligent Audit
The way to become a smarter shipper is to optimize your transportation network through having better data. Intelligent Audit’s machine learning software provides the tools that enable you to quickly and easily optimize your network. The benefits you gain include:
- Industry-leading tech, data-based insights, and automation that guide and help your transportation operations and strategies
- Better financing and accounting software for logistics that benefit everyone in your network
- Bank-based payment tools and industry-leading reporting software that manages the back office and provides an edge over the competition
- Business intelligence helps shippers cut transportation spend, improve their roles, and better compete in the industry despite modern challenges
On average, shippers can save 12 to 18 percent with Intelligent Audit’s transportation optimization services. Contact us today to learn about how Intelligent Audit can help you.